dwot (30.15)

Cliff Diving

6

The markets are holding up amazingly well for the cliff diving the indicators are now showing.

I really don't understand everything I read, but often my number sense goes "EEK!!!" even though I have gaps in my understandings. Right now I'm reading Mish and Krugman. They are both reporting ISM numbers.

Mish has a piece about the service sector of this number going from 54.4 to 44.6 in a month and it is described as "an absolute collapse of this index." It being 22% higher last month is a staggering difference. This isn't a single business... It is a measure of the whole economy in that sector.

Krugman is reporting on non-manufacturing and gives a number of 43.9 and gives a "portend" loss of 137,000 jobs next month.

On a separate point, the Clintons say they got out of the stock market to avoid potential conflicts, and that is a very politically correct thing to say, but as I was planning my exit from the market about then because of the concerns I had, I figured they were using this as an opportunity to get out without spooking the market. I tend to think headline news saying a former president was completely selling of the US stock market would have a considerable negative effect...

Fitch Ratings announced today that in light of consensus movement towards a view of increased loss projections for U.S. subprime residential mortgage backed securities (RMBS) that is now held by various market participants and observers, including Fitch, that the agency will be updating certain modeling assumptions in its ongoing analysis of the financial guaranty industry. Fitch believes it is possible that modeled losses for structured finance collateralized debt obligations (SF CDOs) could increase materially as a result of these updated projections. The need to update loss assumptions at this time reflects the highly dynamic nature of the real estate markets in the U.S., and the speed with which adverse information on underlying mortgage performance is becoming available.

Fitch believes that a sharp increase in expected losses would be especially problematic for the ratings of financial guarantors -- even more problematic than the previously discussed increases in 'AAA' capital guidelines, which has been the primary focus of recent analysis of the industry. Expected losses reflect an estimate of future claims that Fitch believes would ultimately need to be paid by a guarantor. A material increase in claim payments would be inconsistent with 'AAA' ratings standards for financial guarantors, and could potentially call into question the appropriateness of 'AAA' ratings for those affected companies, regardless of their ultimate capital levels.

Fitch expects in addition to increases in expected losses, that its capital guidelines are likely to increase materially as well.

An increase in both expected losses and capital guidelines would place further downward pressure on the ratings of those five financial guarantors - Ambac Assurance Corp. (Ambac), CIFG Guaranty (CIFG), Financial Guaranty Insurance Co. (FGIC), MBIA Insurance Corp. (MBIA) and Security Capital Assurance Ltd. (SCA), the parent company of XL Capital Assurance Inc. - that Fitch has previously identified as having material subprime exposure within their insured portfolios. Ratings on three of these guarantors - Ambac, FGIC and SCA - were recently downgraded by Fitch, and their ratings remain on Rating Watch Negative. In separate releases in conjunction with this announcement, Fitch has also placed the 'AAA' insurer financial strength ratings of CIFG and MBIA on Rating Watch Negative.emphasis addedThis bears repeating: The new modeled losses could "call into question the appropriateness of 'AAA' ratings for those affected companies, regardless of their ultimate capital levels." Regardless of capital levels. That really says it all.

I remember an article, I think in MarketWatch that analyzed the portfolio of Dick Cheney, and he was mostly in cash, in different currencies, in gold, and I don't remember if he had some energy holdings. I thought it was suspicious :)